New Geography

Author: Joel Kotkin

  • Blue States Double Down On Suicide Strategy

    Whatever President Obama proposes in his State of the Union for the economy, it is likely to fall victim to the predictable Washington gridlock. But a far more significant economic policy debate in America is taking place among the states, and the likely outcome may determine the country’s course in the post-Obama era.

    On one side are the blue states, who believe that higher taxes are not only just, but also the road to stronger economic growth. This is somewhat ironic, since, as we pointed out earlier, higher taxes on the “rich” would seem to hurt their economies more, given their high concentration of high-income earners. However, showing themselves to be gluttons for punishment, many of these states have decided to double down on high taxes, raising their rates to unprecedented levels.

    This cascade of higher income taxes started in 2011 when Illinois, arguably the big state with the weakest economy, and the lowest bond ratings, raised income taxes by 66% and business taxes by 46%. Over the past year several other Democratic state governments have pushed through income tax increases, notably California, which raised the tax rate on people with annual income over $1 million to 13.3%, the highest in the nation. And now it appears that Massachusetts and Minnesota are about to raise their taxes as well.

    This is happening at the same time that some red states — notably Kansas and Louisiana — are looking at lowering income tax rates by shifting to rely more on consumption or sales tax revenues. Some red states don’t have income taxes — notably Florida, Texas and Tennessee — and most of those who do are holding the line. Red state leaders, most notably Louisiana’s Bobby Jindal, are placing their bets on  expanding their economies, which would create new taxpayers, boost consumer spending and expand collections of sales taxes.

    The contrast with the blue states — not so much those who voted for Obama, but those controlled totally by Democrats — could not be clearer. They appear to have chosen an economic path that essentially penalizes their own middle and upper-middle class residents, believing that keeping up public spending, including on public employee pensions, represents the best way to boost their economy.

    Yet the gambit of raising state income taxes could not be coming at a worse time. The president’s adopted tax reforms have eliminated write-offs for state taxes for those individuals with incomes over $250,000 and families earning over $300,000. As a result, the affluent residents of these states — California, New York, New Jersey and Illinois alone count for 40% of these deductions nationally — now can expect to get whacked coming and going.

    So which strategy is likely to work best? Most conservatives would assert that the red state approach will prove more effective. But in the short run at least, the free-money policies of the Federal Reserve are supporting many blue-state economies. Plastering institutional investors with low-interest greenbacks raises the price of assets — notably stocks and real estate — creating high incomes for wealthy taxpayers that can then fill the coffers of these states.

    This particularly benefits New York, which depends heavily on Wall Street earnings. (Residents of New York City, which has a city-level income tax on top of high state rates, have the highest overall tax burden in the country.) States such as Massachusetts, Minnesota and even Illinois also have larger than average pockets of wealthy investors; if they do well, higher income taxes could, in the short run at least, bring substantial returns to their state coffers.

    Perhaps the most obvious short-term beneficiary of the new high-tax policy may be my adopted home state of California. Given the higher share of the tax burden borne by the wealthy, a rising stock market tends to send gushers of funds into state coffers, particularly when Silicon Valley is enjoying one of its periodic bubbles. Equally important, increases in real estate prices — up some 25% in Orange County alone — also drives up capital gains and income taxes. This growth is driven not by higher salaries for Californians but is largely investor driven. A remarkable one in three California home purchasers paid with cash in 2012, up from 27% from the previous year. Home prices are climbing rapidly in the Bay Area, where the economy is performing better, and could reach 2007 pre-crash levels within the next year or two, if the current tech bubble continues.

    In the short run, asset inflation combined with higher levels of taxation could solve California’s perennial budget problems, at least temporarily. The state is expected to move into surplus over the coming year. Gov. Jerry Brown sees this convergence as justification for his current “victory lap” in the state and national media. Brown, argues progressive analysts such as Harold Meyerson, has become very much the model of a modern blue state leader.

    Yet, in the longer run, it’s dubious that higher income taxes will make states like California any more competitive or stable fiscally. During the property bubble in the mid-2000s, California also balanced the budget; in 2007 Gov. Arnold Schwarzenegger started comparing the Golden State to ancient Athens and blithely initiated draconian laws on climate change as well as expansion of the social safety net. All things seemed possible until the bubble burst, and with it the windfall from a relative handful of taxpayers. As revenues fell, the state went through five years of huge deficits, a major loss of jobs and growing impoverishment.

    This is likely to happen again, once there’s a downturn in the housing or stock markets. In a sense  higher income taxes serve as an equivalent to what economist Suzanne Trimbath calls “fiscal crack.” For a short period there’s euphoria, as tax revenues flow in and the economy seems to recover. Yet the real problems, such as inadequate private-sector job growth, are never addressed, and as the high fades, the state again faces a loss of jobs and people.

    Perhaps most troubling, states with high income taxes tend to lose people, particularly in the middle class. Over the past 20 years the four biggest net losers of population were high tax states: California, New York, New Jersey and Illinois. Between them they lost roughly a net 8 million out-migrants. The two big net winners, Texas and Florida, had no such taxes, and most of the other big gainers were relatively low-tax states.

    Of course, not everyone is so concerned with income taxes. The ultra-wealthy like David Geffen seem gleeful to pay higher taxes, perhaps because this class, as Mitt Romney showed, have lots of ways to reduce their tax burdens, and after all, don’t have to worry about personal cash flow to keep the business going.

    But enthusiasm for higher taxes historically has been less marked among the much larger group who, although affluent, are far from billionaires. Between 2006 and 2009, California lost a net 45,000 taxpayers earning between $5 million and $300,000 a year, according to the State Department of Finance.

    To be sure, the outward movement slowed during the recession, but more recently the pattern has reasserted itself. Last year, all ten of the leading states gaining domestic migrants were low-tax states including five with no income tax: Texas, Florida, Tennessee, Washington and Nevada. In contrast high-tax New Jersey, New York, Illinois and California suffered the highest rates of out-migration.

    Given these realities, raising already high income taxes has to qualify as somewhat self-destructive over the long run. But so great are the pressures in the blue states to fund expansive welfare programs and public employee pensions that there’s little chance the rising tax tide will soon abate. Sadly, there’s no hotline that seems capable of persuading them to rethink their latest suicidal lurch.

    Joel Kotkin is executive editor of NewGeography.com and a distinguished presidential fellow in urban futures at Chapman University, and a member of the editorial board of the Orange County Register . He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared at Forbes.com.

    Income tax photo by Bigstock.

  • California Becoming Less Family-Friendly

    For all of human history, family has underpinned the rise, and decline, of nations. This may also prove true for the United States, as demographics, economics and policies divide the nation into what may be seen as child-friendly and increasingly child-free zones.

    Where California falls in this division also may tell us much about our state’s future. Indeed, in his semi-triumphalist budget statement, our 74-year-old governor acknowledged California’s rapid aging as one of the more looming threats for our still fiscally challenged state.

    Gov. Jerry Brown, unsurprisingly, did not acknowledge or address the many factors driving the aging trend that include his own favored policy prescriptions. Whatever their intent, the usual "progressive" basket of policies have had regressive results: a tougher time for both the poor and middle class, and a set of density-oriented policies that are likely to drive up housing prices, particularly for the single-family houses largely preferred by people with children.

    These policies have helped turn California into a state that looks less Sunbelt and more like the long-aging centers of the Northeast and the Midwest. It also mirrors declines in fertility and marriage rates in the most-rapidly aging parts of Europe and east Asia. These regions are shifting toward what Chapman University’s recent report, in cooperation with the Civil Service College of Singapore, characterized as post-familialism. Released this past fall in Singapore, the report will be presented in Orange County this week.

    We believe that the rapid decline of marriage and fertility rates in many advanced countries inevitably leads to economic decline, reduced workforces and, likely, an inevitable fiscal disaster. This may be becoming now more true in the United States, a country which once boasted the most vibrant demographics in the high-income world but since the 2007-09 recession has seen a rapid drop in both its marriage rate and fertility rates to well below 2.1 children per female, what is generally referred to as "the replacement rate."

    Just as it differs by country, the degree of post-familialism varies among countries, but it also does among states and regions. Some states, notes a recent Packard Foundation study, such as Texas, Utah and North Carolina, have seen double-digit gains in their child populations over the past decade while California’s has dropped by over 3 percent. Some urban regions like Raleigh, Austin, Houston, Charlotte, Dallas-Fort Worth and Atlanta have also seen rises in their number of children, with population between ages 5 and 17 growing by 20 percent or more over the past decade.

    Historically, California and its regions stood among these family magnets, but no more. Like the states of the Northeast and upper Midwest, the Golden State is becoming rapidly geriatric, as families opt out, and immigration, the primary source of our growth in younger people, declines in an economy ill-suited to migrants with aspirations for a better life.

    Southern California, where immigration has dropped by roughly a third over the past decade, has shared in this decline.

    All three major regions of greater Los Angeles – the San Bernardino-Riverside area, Orange and Los Angeles counties – have seen a sharp drop in their percentages of children. Only the Inland Empire remains still relatively youthful overall, with some 26 percent of its population under 15, well above the national average. In contrast, Los Angeles and Orange counties experienced a 15.6 decline in under-15 population, highest among the nation’s metropolitan areas. Meanwhile, the over 60 population grew by 21 percent.

    One clear indicator can be seen in our declining school populations. Despite massive expenditures for new construction, over the past decade the Los Angeles Unified School District has seen enrollment drop by 7.5 percent. In that period, the student count fell by over 50,000, the largest numerical drop in the nation.

    What is leading to this exodus of families? Sacramento politicians and their media enablers blame insufficient investment in education or simply national aging trends as the root causes. But then, why are other states, including our key competitors, gaining families and children?

    Sacramento lawmakers of both parties share some responsibility. The dominant progressives’ regulatory and tax agenda continues to reduce economic prospects for younger Californians, leading many young families to exit the state. In contrast, older Anglos, the bulwark of the now largely irrelevant GOP, are committed to massive property tax breaks because of Proposition 13. Add good weather and the general inertia of age, and it’s not surprising that families might flee as seniors stay.

    Other factors work against parents, prospective or otherwise. The knee-jerk progressive response to our demographic problems usually entails more money be sent to the schools.

    But they rarely include the student-oriented reform measures such as those enacted in New Orleans (where I am working as a consultant). The poor performance of public education, clear from miserable test results and dropout rates, makes raising children in California either highly problematic or, factoring the cost of private education, extremely expensive.

    If you think Proposition 30’s higher sales and income taxes will change anything, think again.

    Much of that money will end up, almost inevitably, going toward pensions of teachers and other state workers. The hegemonic teacher unions have as their primary goal protecting the system at all costs and resisting change.

    Equally critical, the state’s "enlightened" planning policies also work to discourage families. California’s new climate-change-mandated housing regime – preferring apartments over houses – does not specifically target families, but the case for greater density is often predicated on an ever-declining number of families and an undemonstrated growing preference for density. "Singles and childless couples are the emerging household type of the future," suggests developer and smart growth guru Chris Leinberger.

    These post-familial trends have been incorporated into the influential report, "The New California Dream," widely accepted as gospel by many in our state’s development community.

    The author, the University of Utah’s Chris Nelson, interpreted early 2000s public opinion surveys to suggest a growing preference for smaller lot sizes and apartments, though the data indicate no change over the past 10 years. Developers assume that as singles, empty-nesters and childless couples become as the state’s primary market, this likely misperceived preference will gain even greater strength

    So what would a post-familial future mean for California? You don’t need a crystal ball to figure this one out. Just look at what is happening in other rapidly aging economies, especially Japan, but also much of Europe.

    Dense housing, high taxes and lack of space (such as back yards) tend to discourage family formation. Slower population and labor-force growth then slows the economic engine, which, in turn, creates a greater imbalance between workers and pensioners. The result, ultimately, could be a kind of fiscal Armageddon.

    Fortunately, none of this is inevitable. States such as Utah, Texas and North Carolina continue to attract families, bringing with them new workers, companies and customers. As their economies grow, they can generate broadly based revenue, unlike California, which is increasingly reliant on housing or stock-price bubbles that benefit the already affluent and older populations.

    It is not our karma, Gov. Brown, to submit to a Japanese-like demographic demise. But revitalizing California will require a radical reevaluation of priorities and reconsideration of policy impacts on families.

    Joel Kotkin is executive editor of NewGeography.com and a distinguished presidential fellow in urban futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared in the Orange County Register.

    Childhood kids photo by BigStockPhoto.com.

  • The Cities Winning The Battle For The Fastest Growing High-Wage Sector In The U.S.

    In an era in which many businesses that pay high wages have been shedding jobs, the wide-ranging employment category of professional, scientific and technical services has been a relatively stellar performer, expanding some 15% since 2001. In contrast, employment dropped over 20% in such lucrative fields as manufacturing and information-related businesses (media, telecom providers, software publishing) over the same period, and finance and wholesale trade experienced small declines.

    With an average annual wage nearing $90,000, this category — which includes computer consulting and technical services, accounting, engineering and scientific research, as well as legal, management and marketing services  — increasingly shapes the ability of regions to generate higher-wage jobs. In order to determine which metropolitan areas are doing best, Mark Schill of Praxis Strategy Group compiled rankings based on both long and short-term growth, as well as the extent and growth of each region’s business service economy compared to the national average.

    Notably absent from the top 10 are Chicago and the big metropolitan areas of the Northeast and California that have traditionally dominated high-end business services. The only exception is the third-ranked San Francisco-Oakland-Fremont metropolitan statistical area, which has logged 21% growth in this sector since 2001, while expanding the proportion of such jobs in the local economy to nearly twice the national average. Over the past year alone the region added 22,000 professional and business services jobs, which was more than a quarter of all new positions during that period.

    The continuing vitality of nearby Silicon Valley, and the region’s attraction to educated workers, have made the Bay Area easily the best performer of the nation’s mega-regions. Yet the other leaders on our list are generally smaller, growing metro areas whose expansions have been propelled by a rapid increase in employment in technology and professional management services. These include our top-ranked metro area, Austin-Round Rock-San Marcos, Texas, which enjoyed over 46% growth in employment in professional services since 2001;  fourth-place Raleigh-Durham, N.C.; and No. 5 Salt Lake City, Utah. These areas have enjoyed strong net-in migration of educated workers, and have poached companies from more expensive regions.

    More surprising still has been the rapid ascent of such unheralded regions as second-place Jacksonville, Fla., and Oklahoma City (sixth place). In Oklahoma City, where business and professional services employment has grown over 30% since 2001, progress can be traced to the city’s burgeoning energy sector.

    But some other areas on our list are benefiting from a hitherto unnoted shift of high-end services to lower-cost and often lower-density regions. Jacksonville may be the poster child for this. Over the past decade, the northern Florida metro area’s population has grown 20% to over 1.3 million, but business services employment has expanded nearly 50%, the biggest jump of any of the country’s 51 largest metropolitan areas. Once a business services backwater, the share of jobs in that sector in the local economy has rapidly climbed towards the national average. This growth has been driven by management consulting as well as computer and data center services, an area in which Jacksonville has enjoyed among the highest growth rates in the country. One major player is web.com, which employs 500 people at its headquarters in south Jacksonville.

    Other industries that rely on professional and business service providers have recently added jobs in the market, including BI-LO and Winn Dixie, which moved their combined headquarters  there, as did environmental services company Advanced Disposal. Financial giant Deutsche Bank has also  expanded in the area.

    Jerry Mallot, president of the local business development group Jaxusa Partnership, suggests that low costs, a high rate of housing affordability and Florida’s lack of income tax make Jacksonville attractive to companies seeking to expand or relocate. The state, according to a recent report from New Jersey-based www.BizCosts.com, is now home to five of the country’s least expensive and most pro-business cities. Jacksonville, Orlando, and Tampa also are all among the U.S. metro areas adding college-educated residents the fastest.

    Of course up-and-comers like Jacksonville, Charlotte, and Oklahoma City, and even Portland (10th place), still lack the critical mass of high-end business services of many of the larger, more established metropolitan areas. Some have continued to see strong growth in their professional services sectors. Not surprisingly, this includes greater Washington, D.C. (11th), with 26% growth since 2001, keyed by the expansion of government and the regulatory apparat in recent years. The share of professional services jobs in the local economy is two and a half times the national average, the highest concentration in the country.

    Yet many of America’s largest metro areas, including longtime business service bastions, have lagged well behind. New York, home to Wall Street and many leading consulting, legal and professional firms, ranks a mediocre 32nd out of the 51 largest metro areas, with relatively meager growth of 8.5%. The share of professional services jobs in the New York economy fell, as it did in Los Angeles-Long Beach-Santa Ana (36th) and Chicago-Joliet-Naperville (43rd). This suggest trouble ahead for the future.

    Chicago was among the few areas that actually lost employment in this generally fast-growing field. The other big losers include Detroit-Warren-Livonia, Mich. (39th) , despite a decent  pickup in the last two years as the auto industry has rebounded;  the Cleveland metro area (47th); Milwaukee-Waukesha-West Allis, Wisc. (49th); Birmingham-Hoover, Ala. (50th); and last-place Memphis.

    What do these trends tell us about the future of high-wage employment? Certainly size is not enough, nor even the possession of strong legacy in business service industries. The relative declines of our three largest metro areas — New York, Los Angeles and especially Chicago — alone tells us that. Chicago, which has touted itself as a capital of business expertise, now seems to be falling into the nether reaches long inhabited by older Rust Belt cities and Southern backwaters. Chicago leaders such as Mayor Rahm Emanuel needs to spent less time being possessed by what Time Out Chicago called a “world class city complex” and look into why, as urban analyst Aaron Renn suggests, the city’s vaunted global economy is not enough to produce enough high-wage jobs to sustain its vast surrounding region.

    At the same time, being small and affordable, while helpful, is also not sufficient for business services success, as the presence of a number of smaller metro areas at the bottom of the list suggests. But the strong performance of many mid-sized cities  – ranging from Austin, Raleigh and Salt Lake to less-heralded Jacksonville, Kansas City, Oklahoma City and Richmond — suggest that these jobs will likely continue to migrate to smaller, less costly and generally less dense urban regions.

    Once considered the natural domain of megacities and dense urban cores, high-wage business service jobs, largely due to technology, can increasingly be done anywhere. This suggests that the playing field for such positions, rather than concentrating, will become ever wider. As the struggle for good jobs intensifies in the years ahead, expect the competition between regions to get even greater.

    Professional, Technical, and Scientific Services in the Nation’s Largest Metropolitan Areas
    Rank   Index Score 2001 – 2012 Growth 2005 – 2012 Growth 2010 – 2012 Growth 2012 LQ 2001 – 2012 LQ Change 2012 Avg. Annual Wage
    1 Austin-Round Rock-San Marcos, TX 79.6 46.9% 38.8% 13.8% 1.43 5.9% $90,649
    2 Jacksonville, FL 79.1 50.2% 17.6% 8.4% 0.99 28.6% $72,913
    3 San Francisco-Oakland-Fremont, CA 67.2 21.4% 23.6% 12.9% 1.97 11.3% $120,442
    4 Raleigh-Cary, NC 63.5 34.5% 26.1% 10.8% 1.40 0.7% $81,025
    5 Salt Lake City, UT 63.3 33.4% 26.2% 9.8% 1.10 6.8% $76,341
    6 Oklahoma City, OK 59.9 31.1% 16.6% 11.0% 0.89 8.5% $62,374
    7 Kansas City, MO-KS 59.5 24.2% 17.6% 10.4% 1.24 10.7% $82,060
    8 Richmond, VA 57.7 28.9% 16.9% 8.2% 1.01 9.8% $82,184
    9 Charlotte-Gastonia-Rock Hill, NC-SC 56.1 29.9% 24.4% 6.3% 0.97 5.4% $81,171
    10 Portland-Vancouver-Hillsboro, OR-WA 55.1 24.6% 17.3% 10.2% 1.05 5.0% $73,601
    11 Washington-Arlington-Alexandria, DC-VA-MD-WV 55.1 26.1% 11.7% 3.5% 2.45 1.7% $119,460
    12 Riverside-San Bernardino-Ontario, CA 54.6 45.5% 3.1% 2.1% 0.58 11.5% $52,617
    13 Nashville-Davidson–Murfreesboro–Franklin, TN 52.8 31.7% 11.3% 5.6% 0.88 7.3% $81,189
    14 Buffalo-Niagara Falls, NY 52.4 22.7% 19.4% 5.2% 0.93 10.7% $64,449
    15 Atlanta-Sandy Springs-Marietta, GA 52.2 18.6% 14.4% 10.7% 1.30 3.2% $87,575
    16 Columbus, OH 51.9 23.4% 17.6% 5.8% 1.16 6.4% $81,027
    17 San Diego-Carlsbad-San Marcos, CA 50.9 24.7% 13.4% 3.4% 1.51 5.6% $98,390
    18 Sacramento–Arden-Arcade–Roseville, CA 50.3 29.6% 11.0% 1.1% 1.06 10.4% $81,973
    19 San Antonio-New Braunfels, TX 48.1 30.5% 13.2% 5.3% 0.80 0.0% $69,979
    20 Baltimore-Towson, MD 47.4 20.0% 8.4% 6.1% 1.34 3.9% $93,263
    21 Seattle-Tacoma-Bellevue, WA 47.1 18.3% 21.3% 6.6% 1.21 -1.6% $88,345
    22 Tampa-St. Petersburg-Clearwater, FL 46.7 18.7% 7.6% 5.0% 1.17 8.3% $72,087
    23 Boston-Cambridge-Quincy, MA-NH 44.8 10.5% 15.5% 7.6% 1.62 -1.8% $118,694
    24 Dallas-Fort Worth-Arlington, TX 44.6 20.1% 17.1% 5.4% 1.12 -2.6% $89,392
    25 Denver-Aurora-Broomfield, CO 44.2 14.3% 16.5% 5.5% 1.44 -1.4% $91,922
    26 Las Vegas-Paradise, NV 43.6 33.4% -1.1% 1.6% 0.74 4.2% $74,939
    27 Louisville/Jefferson County, KY-IN 41.8 16.4% 13.8% 4.7% 0.82 2.5% $65,664
    28 Cincinnati-Middletown, OH-KY-IN 41.3 13.3% 7.6% 7.8% 0.96 1.1% $71,259
    29 Orlando-Kissimmee-Sanford, FL 39.9 26.6% 0.0% 3.0% 0.98 -2.0% $72,368
    30 Houston-Sugar Land-Baytown, TX 39.0 20.4% 15.0% 4.1% 1.15 -10.2% $101,352
    31 New Orleans-Metairie-Kenner, LA 38.8 6.0% 11.8% 2.5% 0.97 10.2% $78,866
    32 New York-Northern New Jersey-Long Island, NY-NJ-PA 37.5 8.5% 9.8% 7.1% 1.36 -6.2% $110,211
    33 Indianapolis-Carmel, IN 36.2 17.2% 10.6% 1.9% 0.85 -2.3% $76,393
    34 San Jose-Sunnyvale-Santa Clara, CA 35.4 -5.5% 13.7% 7.9% 2.10 -9.1% $143,640
    35 Pittsburgh, PA 35.0 6.8% 10.0% 6.4% 1.06 -4.5% $81,614
    36 Los Angeles-Long Beach-Santa Ana, CA 34.8 7.8% 4.3% 5.6% 1.22 -3.2% $89,157
    37 Minneapolis-St. Paul-Bloomington, MN-WI 32.2 4.5% 7.1% 7.8% 1.04 -8.0% $89,476
    38 Miami-Fort Lauderdale-Pompano Beach, FL 31.9 10.5% 0.4% 3.5% 1.13 -4.2% $76,567
    39 Detroit-Warren-Livonia, MI 31.6 -6.4% -2.1% 10.5% 1.48 -3.3% $87,909
    40 Philadelphia-Camden-Wilmington, PA-NJ-DE-MD 30.8 6.0% 1.0% 4.2% 1.27 -5.2% $100,423
    41 Rochester, NY 30.3 5.8% 0.7% 6.7% 0.83 -4.6% $65,787
    42 Phoenix-Mesa-Glendale, AZ 28.5 12.9% 1.3% 2.4% 0.92 -8.9% $77,201
    43 Chicago-Joliet-Naperville, IL-IN-WI 25.6 -2.1% 2.3% 5.8% 1.20 -9.8% $97,746
    44 St. Louis, MO-IL 25.5 1.0% 0.9% 4.2% 0.93 -6.1% $77,086
    45 Hartford-West Hartford-East Hartford, CT 25.1 2.9% 3.9% 2.5% 0.91 -7.1% $84,846
    46 Virginia Beach-Norfolk-Newport News, VA-NC 24.5 7.4% 1.1% -1.3% 0.89 -4.3% $71,609
    47 Cleveland-Elyria-Mentor, OH 19.9 -6.5% -3.3% 5.0% 0.92 -8.0% $75,584
    48 Providence-New Bedford-Fall River, RI-MA 19.8 4.4% -3.3% -2.2% 0.72 -4.0% $68,834
    49 Milwaukee-Waukesha-West Allis, WI 15.8 -5.0% -5.1% 2.3% 0.81 -10.0% $76,264
    50 Birmingham-Hoover, AL 4.2 -9.2% -7.8% -2.8% 0.84 -17.6% $75,561
    51 Memphis, TN-MS-AR 2.2 -8.2% -11.6% -2.2% 0.52 -17.5% $63,943

     

    Analysis by Mark Schill, Praxis Strategy Group
    Data Source: EMSI 2012.4 Class of Worker – QCEW Employees, Non-QCEW Employees & Self-Employed 

    The LQ (location quotient) figure in the table above is the local share of jobs that are professional, technical, and scientific services (PSVS) divided by the national share of jobs that are PSVS. A concentration of 1.0 indicates that a region has the same concentration of PSVS as the nation.

    Joel Kotkin is executive editor of NewGeography.com and a distinguished presidential fellow in urban futures at Chapman University, and a member of the editorial board of the Orange County Register . He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared at Forbes.com.

  • More Bubble Trouble in California?

    Just six years since the last housing bubble, California is blowing up another. This may seem like good news to homeowners and speculators alike but it could further accelerate the demise of the state’s middle class and push more businesses out of the state.

    On its face, a real estate turnaround should be a strong sign of an economic recovery. In Southern California, home sales have jumped 14 percent over last year and the median price is up 16 percent, some 25 percent in Orange County. We may not quite be at 2007 super-bubble levels but we’re getting there, particularly in the more desirable areas.

    Yet, before opening the champagne, we need to look at some of the downsides of this asset recovery. We are not seeing much new construction, particularly of single-family homes, so the supply is not being replenished as inventory sinks. Meanwhile, many of the homebuyers are not families seeking residences, but flippers, Wall Street types and foreign investors. A remarkable one-in-three Southern California home purchasers paid with cash, up from 27 percent from last year.

    It’s clear that this increase is not being fueled primarily by income growth among middle-class Californians; these "prices are rising disconnected from household incomes," notes one analyst. Indeed, California incomes have been dropping somewhat more rapidly, down $2,600 per household from 2007-11, according to the American Community Survey, compared with a $200 drop nationwide. California incomes are still 13 percent higher than the national average, but a lot less so than in the past, particularly given the much higher costs and taxation.

    This leads to what is becoming the biggest problem facing the state – a decline in the rates of affordability. The previous bubble left us a legacy of more-affordable housing, an advantage we may now be losing. Historically, and in much of the country, the median multiple, which compares the median-price home to median household income, was in the three range. At the height of the previous bubble, the median multiple for the Los Angeles-Orange County metropolitan area, reached 11.5 in 2007, then fell to a still-elevated 5.7 in 2009, notes demographer Wendell Cox. It remained steady in 2011, but in just the past year the measurement has shot up to 6.2. A few more years at this rate, and housing affordability could worsen materially.

    The new bubble can be seen elsewhere in the state. The most prominent inflation in housing values can be seen in the San Francisco Bay Area, which has enjoyed the most buoyant recovery from the recession. Never a cheap area, in 2006, San Francisco reached a median multiple of10.8 and Silicon Valley (San Jose) rose to 9.3. When the bubble imploded, the median multiple fell to 6.7 in both metropolitan areas, still well above any level recorded before the housing bubble. But now, amidst a concentrated boom in the western side of the Bay, the median multiple rose the equivalent of 1.1 years of income in San Francisco (to 7.8) and 1.0 years of income in San Jose (7.9) in a single year.

    Of course, you can argue that the higher prices in the Bay Area are explainable at least in part by a growth in employment and wealth generated by tech start-ups. But what about soaring prices in places like the Inland Empire (Riverside-San Bernardino), Sacramento or Fresno, where economic growth has been torpid, and unemployment remains well north of 10 percent? Over the past year, Sacramento’s median multiple has risen from an affordable 2.9 to 3.2, the Inland Empire from 3.2 to 3.7 while Fresno’s has gone from 3.1 to 3.5.

    As these prices rises, the California dream, already increasingly off-limits in the coastal areas, begins to become less achievable even in the inland areas. Already, barely 55 percent of Californians own their own home, down from the bubble-period high of 60 percent in 2005 and compared with upward of 65 percent nationally.

    Traditionally, the pent-up demand for houses would be met in the marketplace, but California’s Draconian planning laws make this very difficult. In the first 11 months of 2012, the Census Bureau reports that the Los Angeles-Orange County metropolitan area had half as many construction permits than much smaller Dallas-Fort Worth, 60 percent of Houston’s permits and fewer even than the relatively tiny Austin, Texas, metropolitan area. More to the point, more than 70 percent of L.A.’s construction was in multifamily units while the majority in most areas, (except for such areas as New York, San Francisco, San Jose and San Diego) was in single-family homes.

    Given the state’s planning preference for high-density housing, even in suburban and exurban areas, there’s little hope that California single-family home buyers can expect much relief. As millennials age, and seek out this form of housing as they start families, they will likely look increasingly elsewhere, for example, in Dallas-Fort Worth, Houston, Phoenix or Atlanta. The great California exodus, which slowed during the housing bust, will likely pick up, joining up with the continued movement of employers to more business-friendly states.

    In the short run, of course, not everyone loses from a new bubble. Owners of homes, particularly along the coast, will see a big increase in their net worth. There could be good times ahead again for what author Bob Bruegmann calls "the incumbent’s club." With projected new units running at one-half their 2007 level until 2015, scarcity will help the state’s graying gentry. These same citizens also enjoy a double bonus, since most are protected by Proposition 13 from paying higher property taxes on their rising property values.

    The bubble may also have short-term positive impact on local governments, which may benefit from high property taxes if more homes change hands at higher prices. The "wealth effect" could also bring new capital-gains income to a state government whose revenue stream increasingly depends on the upper-class taxpayer, particularly after the passage of Proposition 30, which increased the state’s reliance on high-income earners. In this sense, the asset inflation could help Gov. Jerry Brown enjoy his much-trumpeted surplus, and he may even avoid the deficit projected next year by the Legislative Analyst.

    These positive effects may be outweighed by bigger concerns. The pushback against single-family homes will restrain the growth of the construction industry, still down 400,000 jobs from its 2006 peak. This is particularly critical for working-class Californians, many of whom previous made decent livings in this industry.

    But workers and homebuilders won’t be the only ones affected; so, too, will consumers. Without a loosening of regulatory constraints, pent-up demand for housing, particularly the single-family variety, will remain largely unaddressed. This will further inflate the bubble even in unfashionable areas. We may soon see a surplus of rental apartments, but not enough single-family homes; the ownership market, as evidenced by the rising median multiples, will continue to tighten, and prices could rise even more, even in a mediocre economy.

    The groups hit hardest by this scenario will be middle- and working-class Californians, particularly above the age of 30-35, most of whom desire to own their own home. Unable to qualify, or unwilling to overleverage, many will be forced either to give up their dreams or look elsewhere, taking their talents and, eventually, their offspring, with them.

    Joel Kotkin is executive editor of NewGeography.com and a distinguished presidential fellow in urban futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared in the Orange County Register.

    Photo by Sean Dreilinger: One of two adjacent bank owned homes.

  • How The South Will Rise To Power Again

    The common media view of the South is as a regressive region, full of overweight, prejudiced, exploited and undereducated numbskulls . This meme was perfectly captured in this Bill Maher-commissioned video from Alexandra Pelosi, the New York-based daughter of House Minority Leader Nancy Pelosi.

    Given the level of imbecility, maybe we’d be better off if the former Confederate states exiled themselves into their own redneck empire. Travel writer Chuck Thompson recently suggested this approach in a new book. Right now, however, Northeners can content themselves with the largely total isolation of Southerners from the corridors of executive power.

    Yet even as the old Confederacy’s political banner fades, its long-term economic prospects shine bright. This derives from factors largely outside the control of Washington: demographic trends, economic growth patterns, state business climates, flows of foreign investment and, finally and most surprisingly, a shift of educated workers and immigrants to an archipelago of fast-growing urban centers.

    Perhaps the most persuasive evidence lies with  the strong and persistent inflow of Americans to the South. The South still attracts the most domestic migrants of any U.S. region. Last year, it boasted six of the top eight states in terms of net domestic migration — Texas, Florida, North Carolina, Tennessee, South Carolina and Georgia. Texas and Florida alone gained 250,000 net migrants. The top four losers were deep blue New York, Illinois, New Jersey and California.

    These trends suggest that the South will expand its dominance as the nation’s most populous region. In the 1950s, the South, the Northeast and the Midwest each had about the same number of people. Today the region is almost as populous as the Northeast and the Midwest combined.

    Perhaps more importantly, these states are nurturing families, in contrast to the Great Lakes states, the Northeast and California. Texas, for example, has increased its under 10 population by over 17% over the past decade; all the former confederate states, outside of Katrina-ravaged Mississippi and Louisiana, gained between 5% and 10%. On the flip side, under 10 populations declined in Illinois, Michigan, New York and California. Houston, Austin, Dallas, Charlotte, Atlanta and Raleigh also saw their child populations rise by at least twice the 10% rate of the rest country over the past decade while New York, Los Angeles, San Francisco, Boston and Chicago areas experienced declines.

    Why are people moving to what the media tends to see as a backwater? In part, it’s because economic growth in the South has outpaced the rest of the country for a generation and the area now constitutes by far the largest economic region in the country. A recent analysis by Trulia projects the edge will widen in the rest of this decade, sparked by such factors as lower costs and warmer weather.

    But some of this comes as a result of conscious policy. With their history of poverty and underdevelopment, Southern states are motivated to be business friendly. They generally have lower taxes, and less stringent regulations, than their primary competitors in the Northeast or on the West Coast. Indeed this year the four best states for business, according to CEO Magazine, were Texas, Florida, North Carolina and Tennessee. They are also much less unionized, an important factor for foreign and expanding domestic firms.

    Despite a tough time in the Great Recession, overall unemployment in the region now is less than in either the West or the Northeast. As manufacturing has recovered, employment has rebounded quicker in the Southeast than in the rival Great Lakes region.

    A portent of the future can be seen in new investment from U.S.-based and foreign companies. Last year Texas, Louisiana, Georgia and North Carolina were four of the six leading destinations for new corporate facilities.

    Some of this growth is centered on the automobile industry, which is increasingly focused on the southern tier from South Carolina to Alabama. The other big industrial expansion revolves around the unconventional oil and gas boom. The region that spans the Gulf Coast from Corpus Christi to New Orleans includes the country’s largest concentration of oil refineries and petrochemical facilities. In 2011 the two largest capital investments in North America — both tied to natural gas production — were in Louisiana.

    In the long run some critics suggest that the region’s historically lower education levels ensure that it will remain second-rate. Every state in the Southeast falls below the national average of the percentage of residents aged 25 and older with a bachelor’s degree.

    Yet the education gap is shrinking, particularly in the South’s growing metropolitan areas. Over the past decade, the number of college graduates in Austin and Charlotte grew by a remarkable 50%; Baton Rouge, Nashville, Houston, Tampa, Dallas and Atlanta all expanded their educated populations by 35% or more. (See “The U.S. Cities Getting Smarter The Fastest“) This easily eclipsed the performance of such “brain center” metropolitan areas as Los Angeles, New York, San Francisco or Chicago. Then there’s the question of critical mass; Atlanta alone added more than 300,000 residents with bachelor’s degrees over the past decade, more than Philadelphia and Miami and almost 70,000 more than Boston.

    Perhaps more revealing, an analysis by Praxis Strategy Group suggest a good portion of these new educated residents are coming from places such as greater New York, Boston, Chicago and Los Angeles. The South’s new breed of carpetbaggers increasingly bring  diplomas, skills and high wage jobs with them. The main attraction: not only jobs, but lower housing prices, lower taxes and, overall, a more affordable quality of life.

    Rather than some comic-book version of a sleepy old south, the South’s dynamic metropolitan regions — not surprisingly, among the nation’s fastest growing — represent the real future of the region. They are becoming more diverse in every way. Houston and Dallas are already immigrant hotbeds; Nashville. Charlotte, Atlanta, Raleigh and Orlando all have among the nation’s fastest-growing foreign populations.

    Growth in the South, as elsewhere, is concentrated in their suburban rings but there’s also been something of central city revivals in Houston, Raleigh, Atlanta and Charlotte. Increasingly these places boast the amenities to compete with the bastions of hipness in everything from medicine and banking to technology and movies. The new owners of the New York Stock Exchange are based in Atlanta and some financial professionals are moving to low-tax states such as Florida.

    For its part New Orleans, where I am working as a consultant , is challenging New York and Los Angeles in the film and video effects industry. Houston boasts the country’s largest medical center. Raleigh, Austin, Houston and San Antonio rank as the largest gainers of STEM jobs over the past decade.

    Over time, numbers like these will have consequences politically, as well as culturally and economically. In the next half century, more Americans will be brought up Southern; the drawls may be softer, and social values hopefully less constricted, but the cultural imprint and regional loyalties are likely to persist. Rather than fade way, expect Southern influence instead to grow over time. It is more likely that the culture of the increasingly child-free northern tier and the slow-growth coasts will, to evoke the past, be the ones gone with the wind.

    Joel Kotkin is executive editor of NewGeography.com and a distinguished presidential fellow in urban futures at Chapman University, and a member of the editorial board of the Orange County Register . He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared at Forbes.com.

    Photo by Belle of Louisville.

  • Prescription for an Ailing California

    Only a fool, or perhaps a politician or media pundit, would say California is not in trouble, despite some modest recent improvements in employment and a decline in migration out of the state. Yet the patient, if still very sick, is curable, if the right medicine is taken, followed by the proper change in lifestyle regimen.

    The first thing necessary: Identify the root cause of California’s maladies. The biggest challenge facing our state is not climate change, or immigration, corporate greed, globalization or even corruption. It’s the demise of upward mobility for the vast majority of Californians, and the rise of an increasingly class-ridden, bifurcated society.

    California’s class problem spills into virtually every aspect of our malaise. It is reflected in both the nation’s highest poverty rate, above 23 percent, and a leviathan welfare state; California, with roughly 12 percent of the population, now accounts for roughly one-third of the nation’s welfare recipients. This burgeoning underclass exacerbates the demand for public services, deprives the state of potential taxpayers and puts enormous pressure on the private sector middle-class to come up with revenue.

    The growing class chasm also distorts state priorities, creating an inordinate demand for public sector employment – and related jobs in health and education – while inculcating deep-seated resentment among private-sector entrepreneurs and professionals toward a state that asks much of them, but gives increasingly little.

    Conservatives generally have recoiled from a class-based analysis, hoping to play on ethnic or cultural fears to advance their agenda of lower taxes and less regulation. Their incoherence and inability to adjust to changing demographics have left them increasingly irrelevant.

    On the other hand, progressives feel comfortable with class as an issue, but see more regulation and ever higher taxes on the private sector as the solution. Yet the experience of the past decade has shown their folly, as California’s middle class has continued to shrink, and poverty has worsened, particularly in the state’s interior. The dangers of a large permanent underclass of unemployed and underemployed should be clear even to the most dreamy progressive.

    Essentially, there is only one practical solution to this dilemma: a program that promotes economic growth. This strategy would transcend the recent reliance on asset-based bubbles that have boosted property markets and technology stocks. Another bubble, whether an investor-driven spike in property values in Newport Beach or a stock mania in Silicon Valley, may provide a temporary boost in revenue but will do very little to improve employment for the vast majority or to stabilize long-term finances.

    The recent surge in tech employment in places like Silicon Valley is neither likely to persist or improve conditions for many Californians. The days of huge employment gains in Silicon Valley – where jobs more than tripled from 1970-2000 – are over. Even in the current boom, the Valley’s employment remains down from a decade ago, and the rest of the state is doing decidedly worse. Social media simply will never be a major job producer or productivity enhancer; Facebook has 4,300 American employees, while old-line firms, like Intel, which have been shifting employment out of the state, have 10 times as many.

    Other proposed bromides, like Gov. Jerry Brown’s promised 500,000 "green jobs," need to be dismissed for what they are – stories we tell our children so they will fall asleep. High-speed rail, another modern-day Moonbeam program, is seen, even by many progressives, such as Mother Jones’ Kevin Drum, as an "ever more ridiculous" boondoggle based on "jaw-droppingly shameless" assumptions.

    Instead of delusion, California needs policies that can boost economic growth in precisely those areas – construction, agriculture, manufacturing and energy – with the best prospects for creating good, high-paying jobs for both blue- and white-collar Californians. Yet, right now the Legislature and, even more so, the empowered state apparat, seem determined to do everything they can to strangle an incipient recovery in these industries.

    Sadly, much of this is done in the name of the environment, but often based on dubious assumptions. Laws that seek to reduce water allocations to the Central Valley are justified as protecting a bait fish, but create windswept new deserts, along with shocking poverty, in the state hinterland. It is no longer enough to protect the still-wild environment; mankind itself must be pushed away from areas that, in some cases, for generations, has provided food for the world, income for families and revenue to the state.

    Concerns over climate change have justified much of the state’s regulatory tsunami. Yet it is absurd to assert that California by itself can change global climate conditions in any meaningful way, given that the big increases of carbon emissions are all coming from the developing world; overall, America’s emissions already are dropping far more quickly than in other high-income parts of the world, largely due to the natural gas boom.

    Yet such mundanities matter little when our greatest policy goal seems to be to make the regulatory apparat, Hollywood and Silicon Valley moguls and their favored nonprofits feel better about themselves; if it provides job opportunity for zealots or the rent-seeking kind for favored venture capitalists and companies like Google, all the better.

    Worse, the consequences of these policies, such as soaring energy prices, likely will not be felt in Portola Valley, Corona del Mar or Pacific Palisades, but, rather, in Santa Ana, Modesto and Oakland. Our regulatory regime already has cost California the opportunity to cash in on two significant booms – in manufacturing and in fossil fuel energy – that are creating middle-income job opportunities and upward mobility in other parts of the country.

    On the environmental side, these policies could have an overall negative effect by driving both people and industries to areas that, because of climate and regulatory environment in their new homes, likely will expand their carbon footprint. Arguably the best thing California can do to reduce global carbon emissions would be to boost its industrial profile. The state also should be leading the shift to natural gas, which California, a potentially big player, so far largely has refused to join.

    Another great opportunity lies in housing, a key source of both white- and blue-collar jobs. Population growth may have slowed, but the pent-up demand, largely from immigrants and millennials, for single-family homes, remains potentially strong. If the supply was increased, and prices moderated, homebuying would become more attractive for families with children. Emissions could be cut in more family-friendly ways, by encouraging more fuel-efficient cars, the dispersion of industry and, most particularly, telecommuting.

    Sparking the revival of these basic industries and higher-wage employment would enhance California’s budget situation over time far more than increasing taxes on the remaining residue of entrepreneurs and professionals. Energy work, in particular, pays high wages, often more than for many tech jobs, and both manufacturing and construction generally provide higher incomes than the low-wage service work that has become the only option for millions of Californians.

    Getting kids from the Central Valley or East Los Angeles working on housing sites, factories and energy facilities is both the most humane, and practical, way to right our fiscal ship. Growth in these industries would also spur the knowledge sector of the economy; many of the strongest gains in STEM (science, technology, engineering and mathematics) jobs in recent years have occurred in manufacturing regions, such as Detroit, or in the energy belt, notably Houston. California’s technical know-how should not be expended simply on developing computer games and social networks; resuscitating the tangible economy would also diversify employment opportunities for the highly skilled.

    Government can play a critical, even determinative, role here. But it needs to shift priorities from redistribution and wealth suppression to providing the basic infrastructure essential for a growth economy. It means transforming our education system from a jobs and pension program for public sector workers and corporate rent-seekers to a focus on providing our economy with the skills – including those used in basic industries – needed for a revived California. It means spending money on the kind of infrastructure, such as gas pipelines, roads, urban bus lines, water and energy systems, that can spur growth instead of misallocations such as high-speed rail and subsidized green energy boondoggles.

    This back-to-basics approach could restore California’s aspirational promise, and not only for a favored few in a handful of favored places, but for the majority of our people, from the mountains to the sea.

    Joel Kotkin is executive editor of NewGeography.com and a distinguished presidential fellow in urban futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared in the Orange County Register.

  • California’s Politics of Farce

    Karl Marx wrote, "History repeats … first as tragedy, then as farce." Nothing better describes how California, with its unmatched natural and human riches, has begun to morph into what the premier California historian Kevin Starr has called "a failed state" – a term more usually applied to African kleptocracies than a place as blessed as the Golden State.

    The tragedy begins with the collapse of a governance system once widely hailed as a leader in efficiency and foresight but which now perpetually teeters at the brink of insolvency and suffers among the worst credit ratings of all the states. Only 20 years ago, the state’s fiscal debt per capita was just below the national average; now it ranks consistently toward the bottom No surprise, then, that California routinely ranked as the "worst governed" state in America.

    This poor performance has consequences, particularly in terms of business. Today, CEOs rank California as just about the worst place to do business in the country, and have for a remarkable eight years in a row. And it’s not just the plutocrats who are angry; a survey by the economic forecasting firm EMSI shows that, in 2011, California also ranked 50th, just ahead of Michigan, in new business startups.

    Unlike my conservative friends, I do not think the fault lies entirely with the Democrats. Instead, it has to do with the total eclipse of the state’s once-lively two-party system. As Starr has noted, California’s golden age of governance from the 1940s to the 1960s was largely a bipartisan affair, with power shifting between the parties. "Despite their differences," Starr writes, "Democrats and Republicans saw sufficiently eye-to-eye" to embrace policies that drove California’s growth.

    Progressives, for their part, often suggest this paradigm died with the 1978 passage of Proposition 13, which diminished local government and concentrated fiscal power in Sacramento. Yet even as late as early 1990s, when the state was facing a dire recession due to the end of the Cold War, liberal Democrats such as Assembly Speaker Willie Brown and state Sen. John Vasconcellos managed to work well with Republican Gov. Pete Wilson and business leaders like Peter Ueberroth to force policy changes that helped spur the state’s last sustained recovery.

    The more recent demise of California governance stems from demographic trends and political miscalculations that have turned our state increasingly into something akin to Mexico under the old dictatorship of the PRI (Institutional Revolutionary Party). Wilson’s decision to embrace the anti-illegal-immigration measure Prop. 187 as part of his 1994 re-election strategy helped precipitate this shift. Although Prop. 187, which passed easily, helped in the short run, it crippled the Republican Party in the ensuing decades.

    Before 1994, Republicans were capable of winning upward of two-fifths of the Latino vote. But after that, as the Latino portion of the electorate grew, from 7 percent in 1980 to more than 21 percent today, these voters became, much like the African-American vote, essentially a bloc owned by the Democrats. In 2010, Jerry Brown won nearly two-thirds of their votes in his bid to return as governor. Asian voters, despite their decidedly middle-class and entrepreneurial bent, sensed the whiff of nativism among Republicans and also turned to the Democrats. With minority communities’ share of the electorate growing every year, the GOP essentially has backed itself into permanent minority status.

    This has set the stage for a bizarre political farce, where minority representatives in Sacramento – with few exceptions – consistently vote against the interests of their own constituents on issues such as water allocations in the Central Valley or regulations that boost energy and housing prices. In their clamor to join the "progressive" team, they, in effect, are placing the California "dream" outside the reach of the state’s heavily minority working class.

    It’s almost surreal to see people who represent impoverished East Los Angeles and Fresno, for example, vote exactly the same way as those who represent rich, white and older voters in Marin County and Westside Los Angeles. You don’t have to watch "Downton Abbey" to see "upstairs, downstairs" politics. Despite mouthing progressive rhetoric, California’s minority legislators seem intent of creating an increasingly feudalized California.

    And what of the middle class – once the bastion of both the GOP and the kind of "responsible liberalism" that promoted growth under the late Gov. Pat Brown? This largely Anglo group has been shrinking, both for decades as a percentage of California’s population and, during the past 10 years, in absolute numbers. From 2000-10 the number of non-Hispanic whites in the state dropped from 15.8 million to 14.95 million.

    Increasingly, the residual California middle class is either part of the public sector nomenklatura or the swelling ranks of retirees. These people often feel no compulsion to leave California for the reasons – such as weather and high property taxes – that drive their counterparts out of places like New York or Illinois. In contrast, the productive, working-age private middle class, harassed by taxes, regulations and soaring costs, increasingly appears more of an endangered species than the famed Delta smelt.

    Of course, there remain pockets of private sector strength, such as Silicon Valley and Hollywood, as well as the various biomedical and biotech companies that still thrive in places such as Orange County and San Diego. These, however, increasingly represent legacy industries, beneficiaries of past accomplishments and better entrepreneurial conditions. Yet, even here, despite the current tech boom, California’s position over the past decade has declined relative to more business-friendly states.

    In the immediate future, we should expect more of the same from our one-party government. Flush from the passage of Prop. 30, tax increases backed by public sector unions, there is little to restrain them beyond occasional resistance from Gov. Brown. Having made California’s income taxes the highest in the U.S., legislators and local officials are already busily concocting new taxes, fees and another spate of bond issues to prop up the nation’s most-cosseted public sector, and, of course, fund its rich pensions at the expense of mostly middle-class taxpayers.

    Indeed the emphasis on income taxes, representing now close to half of state revenue, creates perverse economic outcomes. With their funds hidden in overseas accounts and other dodges, Hollywood moguls and their Silicon Valley counterparts may hang around, mouthing progressive shibboleths while dining exquisitely. But there is clearly erosion among the less-glamorous entrepreneurial class. The number of households earning above $300,000 dropped by 45,000 from 2006-09, according to the Department of Finance, while those earning under $100,000 has grown by more than 180,000. It’s likely that Prop. 30 will accelerate this trend.

    But it’s not only taxes that will depress growth. Our Mad Hatter one-party, public-sector-dominated state seems keen to press its regulatory assault on employers and job creators. With climate change-related legislation certain to boost already high energy costs, we also can expect industries, from food processing to semiconductors and aerospace, to continue heading to friendlier locales.

    Unless these policies are challenged, California will continue to underperform well below its potential. Even worse, a state that created the modern American Dream of upward mobility will continue to devolve toward a kind of neofeudalism dominated by a few rich, with many poor and a well-fed, tenured government caste. The only way to halt this continuing farce in Sacramento is for Californians of all backgrounds to recognize that government that so earnestly claims to serve "the people" is doing anything but that.

    Joel Kotkin is executive editor of NewGeography.com and a distinguished presidential fellow in urban futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared in the Orange County Register.

  • The New Power Class Who Will Profit From Obama’s Second Term

    When President Obama takes the oath of office for the second time, he will also usher in a new era in American power politics. Whereas the old left-wing definition of “who rules” focused on large corporations, banks, energy companies and agribusinesses, the Obama-era power structure represents a major transformation.

    This shift stems, in large part, from the movement from a predominately resource and tangible goods-based economy to an information-based one. In the past, political struggles were largely fought over how to divide up the spoils generated by the basic productive economy; labor, investors and management all shared a belief in the ethos of economic growth, manufacturing and resource extraction.

    In contrast, today’s new hegemons hail almost entirely from outside the material economy, and many come from outside the realm of the market system entirely. Daniel Bell, in his landmark 1973 The Coming of Post-Industrial Society, may have been the first to identify this ascension to “pre-eminence of the professional and technical class.” This new “priesthood of power,” as he put it, would eventually overturn the traditional hierarchies based on land, corporate and financial assets.

    Forty years later the outlines of this transformation are clear. Contrary to the conservative claims of Obama’s “socialist” tendencies, the administration is quite comfortable with such capitalist sectors as entertainment, the news media and the software side of the technology industry, particularly social media. The big difference is these firms derive their fortunes not from the soil and locally crafted manufacturers, but from the manipulation of ideas, concepts and images.

    Apple, Google, Facebook, Amazon and Microsoft are far from “the workers of the world,” but closer to modern-day robber barons. Through their own ingenuity, access to capital and often oligopolistic hold on lucrative markets, they have enjoyed one of the greatest accumulations of wealth in recent economic history, even amidst generally declining earnings, rising poverty and inequality among their fellow Americans.

    Last year the tech oligarchs emerged as major political players. Microsoft, Google and their employees were the largest private-sector donors to the president. More important still, tech workers also provided the president and his party with a unique set of digital tools that helped identify potential supporters among traditionally uninformed and disinterested voters, particularly among the young.

    An even greater beneficiary of the second term will be the administrative class, who by their nature live largely outside the market system. This group, which I call the new clerisy, is based largely in academia and the federal bureaucracy, whose numbers and distinct privileges have grown throughout the past half century.

    Even in tough times, high-level academics enjoy tenure and have been largely spared from job cuts. Between late 2007 and mid-2009, the number of U.S. federal workers earning more than $150,000 more than doubled, even as the economy fell into a deep recession. Even as the private sector, and state government employment has fallen, the ranks of federal nomenklatura have swelled so much that Washington, D.C., has replaced New York as the wealthiest region in the country.

    As a former professor at the prestigious University of Chicago, and a longtime ally of public-sector unions, Barack Obama’s political persona is all but indistinguishable from these new hierarchies. Their support for him has become critical, particularly as the onetime “hedge fund candidate,” decided to wage a very effective class warfare campaign on the hapless Mitt Romney.

    This decreased Obama’s support among the plutocrats, even if they have thrived under his watch, but he made up for this in part by tapping bureaucracies that benefit from expanding government. Indeed the clerisy accounted for five of the top eight sources of Obama’s campaign funding, led by the University of California, the federal workforce, Harvard , Columbia and Stanford. Academic support for Obama was remarkably lock-step: a remarkable 96% of all donations from the Ivy League went to the president, something more reminiscent of Soviet Russia than a properly functioning pluralistic academy.

    To understand the possible implications of the new power arrangement, it is critical to understand the nature of the new clerisy. Unlike traditional capitalist power groups, including private-sector organized labor, the clerisy’s power derives not primarily through economic influence per se but through its growing power to inform opinion and regulate everything from how people live to what industries will be allowed to grow, or die.

    The clerisy shares a kind of mission which Bell described as the rational “ordering of mass society.” Like the bishops and parish priests of the feudal past, or the public intellectuals, university dons and Anglican worthies of early 19th century Britain, today’s clerisy attempts to impart on the masses today’s distinctly secular “truths,” on issues ranging from the nature of justice, race and gender to the environment. Academics, for example, increasingly regulate speech along politically correct lines, and indoctrinate the young while the media shape their perceptions of reality.

    Most distinctive about the clerisy is their unanimity of views. On campus today, there is broad agreement on a host of issues from gay marriage, affirmative action and what are perceived as “women’s” issues to an almost religious environmentalism that is contemptuous toward traditional industry and anything that smacks of traditional middle class suburban values. These views have shaped many of the perceptions of the current millennial generation, whose conversion to the clerical orthodoxy has caught most traditional conservatives utterly flat-footed.

    As befits a technological age, the new clerisy also enjoys the sanction of what Bell defined as the “creative elite of scientists.” Prominent examples include the Secretary of Energy, the Nobel Prize-winning physicist David Chu; science advisor John Holdren; NASA’s James Hansen; and the board of the U.N.’s Intergovernmental Panel on Climate Change. In the words of New York Times hyper-partisan Charles Blow, Republicans have devolved into the “creationist party.” In contrast Obama reigns gloriously hailed as “the sun king” of official science.

    Let’s be clear — this new ascendant class is no threat to either the “one percent,”  or even the much smaller decimal groups. Historically, the already rich and large economic interests often profit in a hyper-regulated state; the clerisy’s actions can often stifle competition by increasing the cost of entry for unwelcome new players. Like Cardinal Richelieu or Louis XIV’s finance minister, Jean-Baptiste Colbert, our modern-day dirigistes favor state-directed capital that has benefited, among others, “green” capitalists, Wall Street “too big to fail” firms and, of course, General Motors.

    More disturbing still may be the clerisy’s regal disregard for democratic give and take. Both traditional hierarchies, or new ones like the Bolsheviks after the 1917 revolution, disdain popular will as intrinsically lacking in scientific judgment and societal wisdom. Some leading figures in the clerisy, such as former Obama budget advisor Peter Orszag, openly argue for shifting power from naturally contentious elected bodies to credentialed “experts” operating in places Washington, Brussels or the United Nations.

    Such experts, of course, see little need for give and take with their intellectual inferiors, in Congress or elsewhere. This attitude is expressed in the administration’s increasing use of executive orders to promote policy goals such as better gun control, reduced greenhouse emissions or reform of immigration. Whatever one’s views on these issues, that they are increasingly settled outside Congress represents a troublesome notion.

    Like empowered bureaucrats everywhere, the clerisy also sometimes reserves a nice “taste” for themselves, much as the old bishops and upper clergy indulged in luxury and even prohibited pleasures of the flesh. Just look at the lavish payouts accorded to Orszag and Treasury Secretary-designate Jacob Lew, who, after serving in the bureaucracy, make millions off the same Wall Street firms that have so benefited from administration policies.

    So who loses in the new order? Certainly unfashionable companies  – oil firms, agribusiness concerns, suburban homebuilders — face tougher times from regulators and the mainstream media . But the biggest losers likely will be the small business-oriented middle class. Not surprisingly Main Street, far more than Wall Street, harbors the gravest pessimism about the president’s second term.

    The small business owner, the suburban homeowner, the family farmer or skilled construction tradesperson are intrinsically ill-suited to playing the the insiders’ game in Washington. Played up to at election time, they find their concerns promptly abandoned thereafter, outliers more than ever in a refashioned political order.

    Joel Kotkin is executive editor of NewGeography.com and a distinguished presidential fellow in urban futures at Chapman University, and a member of the editorial board of the Orange County Register . He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared at Forbes.com.

    Official White House Photo by Pete Souza.

  • California’s Demographic Dilemma

    It’s been nearly 20 years since California Gov. Pete Wilson won re-election by tying his campaign to the anti-illegal immigrant measure Proposition 187. Ads featuring grainy images of presumably young Hispanic males crossing the border energized a largely white electorate terrified of being overwhelmed, financially and socially, by the incoming foreign hordes.

    The demographic dilemma facing California today might be better illustrated by pictures of aging hippies with gray ponytails, of legions in wheel-chairs, seeking out the best rest home and unemployed young people on the street corner, watching while middle-age families drive away, seeking to fulfill mundane middle-class dreams in other states.

    The vital, youthful California I encountered when moving here more than 40 years ago soon could be a thing of the past – if we don’t address the root causes of an impending demographic decline. The days of fast population growth have certainly passed; the state’s population growth barely equaled the national average in the past decade. In the urban strips along the coasts, particularly in the Los Angeles Basin, growth has been as little or half that level.

    To be sure, particularly in this region, few would want to see a return to breakneck population growth. But there’s little denying that California has shifted from a vibrant magnet for the young and ambitious to a state increasingly bifurcated between an aging, predominately white coastal population and a largely impoverished, heavily Hispanic interior. This evolution, as suggested in last week’s essay, has much to do with what passes for "progressive" policies – high taxation, regulation and an Ecotopian delusion that threatens to crush the hopes of many blue-collar and middle-class Californians.

    California’s consistent net outmigration over the past two decades continues, albeit at a slower rate. Over that period, California, notes a recent Manhattan Institute report, has lost a net 3.4 million people. This outflow has slowed with the recession and housing bust, but could swell again, as in the past, when the housing market recovers, and people can sell their homes.

    This long-term outmigration likely stems from a combination of persistently weak job growth, relatively higher unemployment rates amid generally far higher housing prices. Until 1970, notes demographer Wendell Cox housing prices in California, including Los Angeles and Orange County, were generally in line with national averages, adjusted for income.

    But over the past four decades, California’s housing prices relative to income have mushroomed to more than twice the national average. This is particularly true in places such as Orange County, where housing prices, particularly near the coast, are so high that younger even solidly middle-class families have little chance to enter the market.

    These high prices are the result not merely of market forces, but also the perverse impact of Proposition 13, which allows people to stay longer in their homes, as well as regulatory restraints on new housing construction. The regulatory vise, if anything, is almost certain to get worse as the state’s "climate change"-inspired regulations seek to all but ban new single-family house construction, all but guaranteeing higher prices.

    Until recently, the impact of net outmigration has been ameliorated by immigration, not just the kind memorialized in Wilson’s grainy ads but of the legal variety, as well. Over the past decade, however, immigration enforcement data indicates that California has suffered a gradual erosion in its appeal to immigrants; this is particularly true for the L.A. Basin. In 2000, for example, Los Angeles-Orange County received 120,000 new immigrants; a decade later the annual intake had dropped by 87,000.

    Essentially, immigration into the L.A. Basin fell 27.5 percent while immigration nationwide remained essentially stable; the numbers of Houston, Dallas, Seattle, Washington and New York, in contrast, remained level or grew.

    Particularly troubling has been the relative decline in Asian immigrants, whose numbers now surpass Hispanics, and who also tend to be better educated than other newcomers. An analysis of migration of Asians conducted by demographer Wendell Cox, shows Asians heading increasingly to places like Houston, Dallas-Fort Worth, Raleigh, N.C., and Nashville, Tenn. Still home to the largest concentration of Asian-Americans, the L.A. Basin’s growth rate is now among the lowest in the nation, 24 percent in the past decade, compared with 39 percent in New York, and more than 70 percent in Dallas-Fort Worth and Houston.

    Some, like USC’s Dowell Myers, suggest slowing migration and population growth may actually be a positive, and claims "the demographic picture is brighter than it is has been in decades." He suggests that, rather than depend on the energy of newcomers, we now ride on "the skills of homegrown Californians."

    Certainly, slower growth may help with our traffic problems and even provide a break on housing inflation, but the contours of our demographics appear less than favorable. Over the past decade, for example, virtually all the largest metropolitan areas – including Silicon Valley – have seen slower percentage growth in college graduates than the national average. The big exception has been Riverside-San Bernardino, which started from a low base but has appeared to attract some college-educated people from the more expensive coastal regions.

    In contrast, largest rate of growth in educated people has taken place in regions such as Raleigh, N.C.; Austin, Texas, Phoenix and Houston; all these cities have increased the number of bachelor’s degrees at least one-third more quickly than the major California cities. Although California retains a strong educational edge, this is gradually eroding, particularly among our younger cohorts. In the population over age 65, California ranks an impressive fourth in terms of people with bachelor’s or higher degrees; but in the population under 35 our ranking falls to a mediocre 28th. If we are becoming more reliant on our native sons than in the past, we may be facing some serious trouble.

    This pattern can also be seen in those with graduate educations, where we are also losing our edge, ranking 19th among the younger cohort. More worrying still is the dismal situation at our grade schools, where California now ranks an abysmal 50th in high school attainment. Our students now rank among the worst-performing in the nation in such critical areas as science and math.

    If these issues are not addressed forcefully, what then is our demographic trajectory? One element seems to be a decline in the numbers of children, particularly in the expensive coastal areas. Over the past decade, according to the Census, the Los Angeles-Orange County region has suffered among the most precipitous drops in its population under age 15 – more than 12 percent – than any large U.S. metropolitan area.

    The numbers are staggering: in 2010 the region had 363,000 fewer people under age 15 than a decade earlier, while competitors such as Dallas-Fort Worth and Houston increased their youngsters by over 250,000 each. Orange County alone suffered an 8 percent decline in its under-15 population, a net loss of 54,000.

    If current trends continue, we may not be able to rely on immigrants to make up for an nascent demographic or vitality deficit. In fact, demographer Ali Modarres notes that L.A.’s foreign born-population is now older than the native-born, as their offspring head off for opportunities in lower-cost, faster-growing regions.

    Ultimately the state’s political and economic leadership needs to confront these demographic shifts, and the potential threat they pose to our prosperity. We can’t just delude ourselves that we attract the "best and brightest" from other states without creating improving the basics critical to families, from other states and abroad, such as education, reasonable housing costs and business climate. California ‘s beauty, great weather and a bounteous legacy remain great assets, but the state can no longer rest on its laurels if it hope to attract, and retain, a productive population capable of rebuilding our state’s now-faded promise.

    Joel Kotkin is executive editor of NewGeography.com and a distinguished presidential fellow in urban futures at Chapman University, and a member of the editorial board of the Orange County Register . He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared in the Orange County Register.

    Photo illustration by krazydad/jbum

  • The New Places Where America’s Tech Future Is Taking Shape

    Technology is reshaping our economic geography, but there’s disagreement as to how. Much of the media and pundits like Richard Florida assert that the tech revolution is bound to be centralized in the dense, often “hip” places where  “smart” people cluster. Some, like Slate’s David Talbot, even fear the new tech wave may erode whatever soul is left to increasingly family free, neo-gilded age San Francisco.

    Such claims have been bolstered by the tech boom of the past few years — especially the explosion of social media firms in places like Manhattan and San Francisco. Yet longer-term trends in tech employment suggest such favored media memes will ultimately prove well off the mark. Indeed, according to an analysis by the Praxis Strategy Group, the fastest growth over the past decade in STEM (science, technology, engineering and mathematics-related) employment has taken place not in the most fashionable cities but smaller, less dense metropolitan areas.

    From 2001 to 2012, STEM employment actually was essentially flat in the San Francisco and Boston regions and  declined 12.6% in San Jose. The country’s three largest mega regions — Chicago, New York and Los Angeles — all lost tech jobs over the past decade. In contrast, double-digit rate expansions of tech employment have occurred in lower-density metro areas such as Austin, Texas; Raleigh, N.C.; Columbus, Ohio; Houston and Salt Lake City. Indeed, among the larger established tech regions, the only real winners have been Seattle, with its diversified and heavily suburbanized economy, and greater Washington, D.C., the parasitical beneficiary of an ever-expanding federal power, where the number of STEM jobs grew 21% from 2001 to 2012, better than any other of the 51 largest U.S. metropolitan statistical areas over that period.

    The question is whether the last two to three years, during which places like San Francisco, New York and Boston have enjoyed stronger STEM growth than their peripheries, represents a paradigm shift or is just a cyclical phenomenon. As with tech in general, the long-term trends are not so city-centric; over the past decade,  the core counties nationwide overall have lost about 1.1% of their tech jobs while more peripheral areas have experienced a gain of 3.5%.

    Today’s urban tech boom looks a lot like a rerun of the dot-com boom of the late 1990s. In that period media-savvy dot-com startups proliferated in such places as South of Market in San Francisco and the Silicon Alley in lower Manhattan. At their height, these firms and their founders were as likely to be covered in the fashion and lifestyle sections as on the business pages.

    Yet by the early 2000s, many of these dot-com darlings had merged, been acquired or simply gone out of business. Anchored largely on hype, they fell victim to flawed business models, and rapid industry consolidation.  In San Francisco, for example, tech employment crashed from a high of 34,000 in 2000 to barely 18,000 four years later. Silicon Alley suffered a similar downward trajectory, losing 15,000 of its 50,000 information jobs in the first five years of the decade.

    The peaking social media boom, marked by the weak performance of Facebook’s IPO last year, suggest another bust at the end of the “hype cycle.” Urban darlings such as  San Francisco’s Zynga and Chicago’s Groupon have floundered in spectacular fashion. More are likely to join them.

    These firms may have generated buzz, but they have done not so well at the mundane task of making money. One problem may be that  the most avid users of social media are largely young people from the “screwed” generation who lack much in the way of spending power — a clear turnoff to advertisers. Now , with venture capital flows declining overall,  cooler heads in the Valley are shifting bets to more business-oriented engineering and research-intensive fields more grounded in marketplace realities.

    And what about the future of the Valley — still home to virtually all the Bay Area’s top tech firms? Its glory days as a job generator and economic exemplar seem to have passed. Between 1970 and 1990 the number of people employed in tech in the Valley more than doubled to 268,000, and then burgeoned to over 540,000 in the 1990s. At the peak of the last tech boom in 2001, the unemployment rate in Santa Clara County was a tiny 3%; the Silicon Valley Manufacturing Group confidently predicted there would be another 200,000 jobs by 2010.

    However, at what may be the peak of the current boom, the number of tech jobs in the Valley remains down from a decade ago and unemployment is over 7.7%, just around the national average. In reality, social media was never going to reverse the downward trajectory in the rate of job growth. Old-line companies like  Hewlett-Packard or Intel, with over 50,000 employees in the U.S. alone, were capable of creating a broad range of opportunities for workers; in contrast, the social media big three of Facebook, LinkedIn and Twitter together have less than 6,500 employees.

    As the social media industry matures and consolidates,   employment is likely to continue shifting to less expensive, business-friendly areas. The Bay Area, where the overall cost of living is 68% higher than the national average and housing is the most expensive in the nation, may continue to attract and retain only the highest-end, best-paid workers. But for the most part they will follow the path of established tech firms such as  Apple, Intel, Adobe, eBay and IBM  to lower-cost places like Austin, Columbus and Salt Lake City. A similar phenomena also can be seen in other urban-centered industries, such as entertainment and finance where  virtually all employment growth is in places like St. Louis, Des Moines and Phoenix, even as the largest centers, New York, Chicago, Boston, Los Angeles and San Francisco have suffered significant job losses.

    Demographic forces may further accelerate these trends. The critical fuel for tech growth, educated labor, is now expanding faster in places like Columbus, Austin, Raleigh, Dallas and Houston than in Boston, San Jose and San Francisco. The old centers may still enjoy a lead in brains, but other places are catching up rapidly.

    Companies may also discover that with many millennials starting to hit their 30s, some may seek to leave their apartments to buy houses and start families. In California new local regulations essentially ban the construction of new single-family homes in some of the state’s biggest metro areas, pricing this option out of reach for all but a few, and forcing a key demographic group to seek residence elsewhere.

    Under these conditions, Silicon Valley will be forced to rely increasingly on inertia and mustering of financial resources than innovation. As a result, the nation’s tech map will continue to expand from the Bay Area, Boston, Seattle and Southern California to emerging metropolitan areas in North Carolina, Texas, Utah, Colorado and the Pacific Northwest. In the future parts of Florida, Phoenix, and even Great Plains cities like Sioux Falls and Fargo could also achieve some critical mass.

    Ultimately, one of the main dynamics of the information age — that even sophisticated tasks  can be done from anywhere — works against the dominion of single hegemonic industry centers like Wall Street, Hollywood and Silicon Valley. The tech sector is particularly vulnerable to declustering, due in large part thanks to the freedom from geography created by technologies of its own making.   Silicon Valley may continue to reap riches from the periodic technology  gold rush , but in the longer term, tech growth will continue its long-term dispersion to ever more parts of the country.

    STEM Occupations in the Nation’s 51 Largest Metropolitan Areas
    MSA Name 2001 – 2012 Growth 2005 – 2012 Growth 2010 – 2012 Growth 2012 Location Quotient LQ Change, 2001 – 2012
    Washington-Arlington-Alexandria, DC-VA-MD-WV 21.1% 12.7% 3.7% 2.19 10.6%
    Riverside-San Bernardino-Ontario, CA 18.6% -1.4% 2.2% 0.57 1.8%
    San Antonio-New Braunfels, TX 18.3% 17.2% 4.5% 0.83 1.2%
    Baltimore-Towson, MD 17.9% 11.4% 3.9% 1.37 15.1%
    Raleigh-Cary, NC 17.9% 14.6% 6.2% 1.53 0.0%
    Las Vegas-Paradise, NV 17.2% -2.6% 0.8% 0.52 4.0%
    Salt Lake City, UT 16.3% 18.1% 7.4% 1.16 4.5%
    Houston-Sugar Land-Baytown, TX 15.7% 17.2% 6.6% 1.20 -2.4%
    Seattle-Tacoma-Bellevue, WA 15.4% 22.2% 6.7% 1.86 8.1%
    Jacksonville, FL 13.0% 6.5% 2.4% 0.87 8.7%
    Austin-Round Rock-San Marcos, TX 12.2% 17.2% 9.1% 1.82 -8.5%
    San Diego-Carlsbad-San Marcos, CA 11.3% 8.0% 2.1% 1.38 6.2%
    Columbus, OH 10.4% 12.8% 4.7% 1.27 7.6%
    Orlando-Kissimmee-Sanford, FL 9.4% -1.1% 0.8% 0.84 -3.4%
    Indianapolis-Carmel, IN 6.9% 6.5% 2.7% 1.04 2.0%
    Nashville-Davidson–Murfreesboro–Franklin, TN 6.7% 3.5% 2.4% 0.77 -1.3%
    Sacramento–Arden-Arcade–Roseville, CA 6.4% 3.5% 0.4% 1.33 2.3%
    Oklahoma City, OK 5.5% 9.6% 6.4% 0.89 -1.1%
    Pittsburgh, PA 5.3% 10.3% 4.9% 1.07 5.9%
    Virginia Beach-Norfolk-Newport News, VA-NC 4.8% 2.3% 0.5% 1.10 3.8%
    Charlotte-Gastonia-Rock Hill, NC-SC 4.3% 8.2% 5.7% 0.99 -3.9%
    Kansas City, MO-KS 4.0% 5.8% 4.6% 1.12 4.7%
    Richmond, VA 3.8% 4.4% 3.4% 0.99 0.0%
    Cincinnati-Middletown, OH-KY-IN 3.7% 5.5% 6.8% 1.02 4.1%
    Buffalo-Niagara Falls, NY 3.2% 6.4% 3.6% 0.90 4.7%
    Dallas-Fort Worth-Arlington, TX 3.1% 11.4% 5.5% 1.19 -5.6%
    San Francisco-Oakland-Fremont, CA 2.5% 15.0% 9.9% 1.63 5.8%
    Phoenix-Mesa-Glendale, AZ 2.3% 3.5% 3.9% 1.05 -6.3%
    Minneapolis-St. Paul-Bloomington, MN-WI 2.2% 6.7% 5.9% 1.31 1.6%
    Portland-Vancouver-Hillsboro, OR-WA 1.6% 6.4% 5.4% 1.19 -3.3%
    Louisville/Jefferson County, KY-IN 0.9% 9.6% 6.9% 0.76 0.0%
    Denver-Aurora-Broomfield, CO 0.5% 10.8% 3.7% 1.43 -2.1%
    Atlanta-Sandy Springs-Marietta, GA -1.0% 5.5% 6.5% 1.07 -2.7%
    Boston-Cambridge-Quincy, MA-NH -1.3% 11.2% 6.0% 1.64 -1.2%
    Providence-New Bedford-Fall River, RI-MA -1.5% -1.6% 1.9% 0.88 2.3%
    Philadelphia-Camden-Wilmington, PA-NJ-DE-MD -2.8% -1.4% 1.4% 1.06 -1.9%
    Hartford-West Hartford-East Hartford, CT -4.5% 1.5% 0.3% 1.10 -3.5%
    New York-Northern New Jersey-Long Island, NY-NJ-PA -4.6% 2.8% 3.2% 0.90 -6.2%
    St. Louis, MO-IL -4.8% -1.7% 1.4% 1.05 -0.9%
    Milwaukee-Waukesha-West Allis, WI -6.1% -0.8% 4.0% 1.00 0.0%
    Tampa-St. Petersburg-Clearwater, FL -6.3% -4.3% 2.5% 0.89 -3.3%
    Miami-Fort Lauderdale-Pompano Beach, FL -6.4% -8.3% 0.6% 0.67 -8.2%
    Los Angeles-Long Beach-Santa Ana, CA -7.1% -3.5% 3.1% 0.98 -5.8%
    Memphis, TN-MS-AR -7.3% -4.0% 0.7% 0.62 -4.6%
    Cleveland-Elyria-Mentor, OH -8.8% -2.1% 4.3% 0.89 1.1%
    Chicago-Joliet-Naperville, IL-IN-WI -10.8% -1.4% 3.5% 0.87 -7.4%
    Birmingham-Hoover, AL -11.4% -8.0% -2.0% 0.76 -8.4%
    Rochester, NY -12.0% -2.1% 4.1% 1.14 -10.2%
    San Jose-Sunnyvale-Santa Clara, CA -12.6% 12.4% 8.3% 3.18 -4.8%
    New Orleans-Metairie-Kenner, LA -16.0% -7.4% -2.4% 0.74 0.0%
    Detroit-Warren-Livonia, MI -17.7% -10.3% 10.5% 1.42 -3.4%
    Analysis by Mark Schill, Praxis Strategy Group
    Data Source: EMSI 2012.4 Class of Worker – QCEW Employees, Non-QCEW Employees & Self-Employed 

    The LQ (location quotient) figure in the table above is the local share of jobs that are STEM occupations divided by the national share of jobs that are STEM occupations. A concentration of 1.0 indicates that a region has the same concentration of STEM occupations as the nation. The analysis covers 80 STEM occupations in all industries.

    Joel Kotkin is executive editor of NewGeography.com and a distinguished presidential fellow in urban futures at Chapman University, and a member of the editorial board of the Orange County Register . He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared at Forbes.com.

    Computer engineer photo by BigStockPhoto.com.